Food inflation crippled India’s households in 2010

The price of a basket of staple foods has become crippling in rural and urban India. The government’s response is to favour agri-commodity markets, greater retail investment and more technology inputs. For food grower and consumer alike, the need for genuine farm swaraj has never been greater.

The retail prices of staple foods rose steadily through 2010, far exceeding in real terms what the Government of India and the financial system call “headline inflation”, and exceeding also the rate of the rise in food inflation as calculated for the country. These calculations ignore the effective inflation and its increase as experienced by the rural and urban household, and they ignore also the considerable regional variations in India of a typical monthly food basket.

Moreover, from a household perspective an increase in the prices of food staples is not seen as an annual phenomenon, to be compared with some point 12 months in the past. It is intimately linked to employment (whether informal or seasonal), net income, and the pressures on the food budget from competing demands of medical treatment, education and expenses on fuel and energy.

When real net income remains unchanged for over a year or longer, the household suffers a contraction in the budget available for the food basket, and this contraction – often experienced by rural cultivator families and agricultural labour – is only very inadequately reflected by the national rate of increase in food inflation.

An indicator of the impact on households is provided by the price monitoring cell of the Department Of Consumer Affairs, Ministry Of Consumer Affairs, Food and Public Distribution. This cell records the retail and wholesale prices of essential commodities in 37 cities and towns in India. Data over a 36-month period (2008 January to 2010 December) for the prices of cereals, pulses, sugar, tea, milk and onions reveals the impact of the steady rise in the Indian household’s food basket.

In 33 cities and towns for which there are regular price entries, the price per kilo of the “fair average” quality of rice has risen by an average of 42% over the calendar period 2008 January to 2010 December. In 12 of these urban centres the increase has been over 50% (Vijayawada, Thiruvananthapuram, Hyderabad, Bengaluru, Patna, Cuttack, Bhubaneshwar, Indore, Bhopal, Shimla, Karnal and Hisar).

The average price rise over the same period for a kilo of tur dal, for 32 cities for which there is regular price data, is 46%. In 11 of these urban centres the increase in the price of tur dal has been over 50% (Puducherry, Bengaluru, Patna, Agartala, Nagpur, Mumbai, Indore, Ahmedabad, Shimla, Jammu and New Delhi). Where wheat is concerned, from among the 27 cities and towns for which there are regular price entries over three years, in 10 the per kilo price rise is 30% and more.

If in search of a comforting cup of tea over which to rue the effect of the steady price rise, this too will cost a great deal more than it did three years ago. For 25 urban centres with regular price data, the average increase over the same period of 100 grams of loose tea leaf is 38% and in 11 of these cities and towns the increase is between 40% and 100%.

The sugar with which to sweeten that cup of tea has become prohibitively expensive over the January 2008 to December 2010 period. For the 32 cities and towns for which there is regular price data, the average price increase for a kilo of sugar is 102%, the range of increase being between 76% and 125%.

This increase for sugar – relatively homogenous for the price reporting centres – exhibits the countrywide nature of the price rise of the commodity. Nor is there a household economy case for substituting sugar for gur, or jaggery. For the 17 towns and cities reporting data for gur prices over the same 36-month period, the increase in price over the period has been an average 118% with 11 of these centres recording an increase of over 100%.

Adding a third element of higher cost to the humble cup of tea is the price of milk. For the 25 towns and cities which recorded increases in the per litre price of milk over the 36-month period (one city recorded a drop) the average rise is 37%. In seven cities a litre of milk costs at least 50% more in December 2010 than what it did in January 2008 – Ahmedabad, Bhopal, Indore, Jaipur, Jodhpur, Patna and Hyderabad.

In conspicuous contrast are the rates of increase in price of cooking media – groundnut oil, mustard oil and vanaspati. Over the January 2008 to December 2010 period the 37 urban centres recorded average price increases of 10%, 9% and 10% respectively for groundnut oil, mustard oil and vanaspati.

Finally, the volatile allium cepa, or common red onion. In 29 cities and towns reporting regularly the per kilo prices of onion, the increase in price of the vegetable has been astonishingly steep. The average increase for 29 cities is 197.5% and in 14 the increase has been 200% and above – New Delhi, Shimla, Ahmedabad, Indore, Mumbai, Rajkot, Agartala, Aizawl, Bhubaneshwar, Cuttack, Kolkata, Chennai, Hyderabad and Vijaywada. In pale comparison is the otherwise worrying average increase of 39.5% for a kilo of potatoes – this is the 36-month average increase recorded by 27 urban centres.

4 Responses

[…] This new peak, at a time when the price of crude oil is above USD 90 a barrel, is the strongest signal yet that global foodgrain supply has entered a critical phase. The FAO index has been rising steadily through the second half of 2010 – we discussed it here. […]

[…] a beginner-level book on economics. Any book. Or maybe just get something off the net, like this: https://makanaka.wordpress.com/2011/01/02/food-inflation-crippled-indias-households-in-2010/ You could even go to the market and jot down the prices of stuff, come back a year later and […]